October 26, 2012
/24-7PressRelease/ -- A group of Cold Stone Creamery franchisees is suing parent company Cold Stone Creamery Inc. over the failure of the franchisor to disclose information about marketing and gift cards. The franchisee-franchisor suit regarding an alleged lack of transparency was filed in a Florida court.
The National Independent Association of Cold Stone Creamery Franchisees filed suit against Cold Stone Creamery earlier this year asking Cold Stone to disclose the amount of money in a flexible marketing program and the unspent amount in the ice cream chain's gift card program. The NIACCF represents more than 120 individual Cold Stone franchisees with about 200 Cold Stone locations. Cold Stone Creamery Inc. is based in Scottsdale, Arizona, and is a division of Kahala Corp.
Arbitration Agreement Stalled Lawsuit
The Florida district court ruled that the lawsuit against Cold Stone could not go forward because of an arbitration clause contained in Cold Stone's franchise agreements. Cold Stone argued in court that the franchisees represented by the independent group all signed franchisee contracts that required all disputes to be resolved through arbitration in Arizona, and the court agreed. Therefore the franchisee-franchisor lawsuit has been stayed.
Had the lawsuit continued in Florida, the franchisees would have likely argued that the Florida Franchise Act provides them with certain protections. The Florida franchise law, for example, generally prohibits franchisors from making false statements about the costs of investing, misrepresenting chances of success, and misleading a franchisee about the number of other franchises the franchisor plans to sell in the same area. A violation of the Florida Franchise Act can provide the franchisee the right to recover its total investment.
Franchise owners and franchisors involved in business disputes should contact an attorney experienced in franchise law to review their legal rights.
Article provided by Ansa Assuncao LLP
Visit us at http://www.ansalaw.com
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